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Creation and Destruction: Evidence from an Emerging Market

  • Oscar Landerretche Moreno
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    We use a panel database constructed from Chilean IRS data to study firm creation and destruction. As expected, larger and more productive firms are less likely to be destroyed; and (also as expected) they are less likely to be created than smaller and less productive firms. They are more likely to reflect the shocks of the economy on sales performance, or in the execution of individual entrepreneurial projects within the firm. For smaller and less productive firms shocks and changes are reflected in survival, destruction or creation. We have shown that ”financial dependence” has different meaning for smaller firms, as reflected in a significant difference in sign of the corresponding parameter. For them it is an indicator of ”financial constraint” and acts in our regressions as a predictor of firm destruction, of bad sales performance and a also as a stronger predictor of firm creation than for larger firms.

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    File URL: http://www.econ.uchile.cl/uploads/publicacion/df4c7741-43d6-4bc6-be23-3feeba98cb90.pdf
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    Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp246.

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    Length: 62 pages
    Date of creation: Jun 2007
    Date of revision:
    Handle: RePEc:udc:wpaper:wp246
    Contact details of provider: Web page: http://www.econ.uchile.cl/

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    1. Ricardo J. Caballero & Mohamad L. Hammour, 1998. "The Macroeconomics of Specificity," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 724-767, August.
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    7. Forbes, Kristin J., 2003. "One Cost of the Chilean Capital Controls: Increased Financial Constraints for Smaller Traded Firms," Working papers 4273-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
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    13. Adam B. Ashcraft & Murillo Campello, 2002. "Borrowers' financial constraints and the transmission of monetary policy: evidence from financial conglomerates," Staff Reports 153, Federal Reserve Bank of New York.
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    15. Harris, John R & Schiantarelli, Fabio & Siregar, Miranda G, 1994. "The Effect of Financial Liberalization on the Capital Structure and Investment Decisions of Indonesian Manufacturing Establishments," World Bank Economic Review, World Bank Group, vol. 8(1), pages 17-47, January.
    16. Robert E. Carpenter & Bruce C. Petersen, 2002. "Is The Growth Of Small Firms Constrained By Internal Finance?," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 298-309, May.
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